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tv   Bloomberg Daybreak Europe  Bloomberg  December 17, 2018 1:00am-2:30am EST

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nejra: good morning. i am neighbor say huge. -- nejra cehic. manus: i am a manus cranny. nejra: stocks start higher. features pointed to a rebound. worries are overdone. all eyes on the fed. will he dialed back expectations for 2019? your political risk watch. .heresa may faces parliament
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italy is set to offer a new deficit target to the eu. ♪ manus: it is a deal. atachi agrees to buy abb, deal of $11 billion. abb shareholder, ca-ching.-- ca-ching, the price tag is $11 billion, special share buyback especially for sure return or cash return, abb says it will close in the first half of 2020. what is hitachi getting their hands on?
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it is a broad sweep of assets, transformers, long-distance storage, capacity and they have had a relationship since 2014. this will boost hitachi's footprint on that side of the business. those are the breaking headlines. the quick snapshot of the markets. a dovish hike, a question for the markets. is the dollar overrun? that is the mood for the market. if you get a hike from the fed, do you want to be positioned to set out the dollar? see re looking at the next n -- -- ntse up. relief.e bit of the world index is also there. we are in contraction territory in the world. of this morning,
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in theted to buy the dip market because of markets are overpricing. good morning. how are you doing? nejra: i am doing well. it was, the lowest since april. at one point, underperformance in health care, particularly, and a lot of tech stocks. banks in a bear market. s&p futures bounceback, up. a bad debt on friday for european and asian equities and could see a bit of a bounceback today. the 10 year yield, we saw a drop. 2.8 nine a handle. the fed is an focus. the market is preparing for a dovish hike. if we get anything else and not a change to the dot plot, you could see more curve flattening. a loss of about 2.7%.
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when you see concerns over supply current a check of the markets in asia. juliette saly has more. boosted by the uptick in you as futures. about 0.3%dex of after the 4% drop on friday. you can thank a lot of the positivity up by 0.6%. australia had a good session today. higher. a buyback of -- on the back of selling some of the shell assets. late trade up. the asx. in little bit of a switch out of china stocks. health care players in the u.s. is similar in the china session. some uptick coming in india. inook at some of the stocks a detailed and i am focus on the japanese session. you heard about hitachi and abb.
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a $1.5 billiong deal to buy back bristol-myers over-the-counter unit as it tries to globalize. shares lower. japan on track for its best two-day gain since lifting in 2014 on news the margins could improve. 63% over today and friday's session. this company here manufactures and sells use kitchen equipment and missed reporting deadline taking a loss of the last couple sessions over 1.8 billion u.s. dollars and is on the tokyo exchange. a lot of movement in a japanese sessions today. nejra: juliette saly, thank you. to bloomberg first word news with annabel. annabel: thank you. president trump's shakeup of the staff is continuing.
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ethicsnke he is facing investigations will step down. the u.s. president said to be considering a replacement for wilbur ross. shutdowne government later this week leading politicians on both sides to say it is up to president trump to resolve the issue. >> president trump should understand there are not the vote for the wall and the house or the senate. he is not going to get the wall in any form. annabel: u.k. prime minister theresa may will attack supporters of a second referendum today as she explains why leaders rebuffed her last week. may, who accused of former prime minister tony blair, of undermining for asking for second vote, will say is a catastrophic breach of trust. supposing there is another
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turnout,m, or a lower let me tell you that if a there is another referendum, which i do not think it will be, people like me will be demanding best of two of three. an urgent shareholder meeting to discuss governors and relationships between two companies. renault has said the middle will be later today. global news 20 47 powered by more than 2700 analysts in more than 120 countries. manus: thank you. be bdent trump seems to eset with setbacks.
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a person testified and said trump had ordered hush famous to two women -- payments to two women as the president is reshuffling his top team and is facing a showdown with congress over his proposed wall in congress. , what is the biggest risk for president trump right now? there are a lot of things coming together. at the same time he is fighting with congress over the border wall funding and it are made a potential government shutdown, he is having to deal with staff turmoil and a turnover since the midterm election. he has replaced his chief of staff, now the interior secretary who has been deceased by investigations and talk of possible the commerce secretary and homeland secretary being pushed out.
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there is a lot going on at the white house. even as robert mueller's investigation into russian collusion in the 2016 presidential campaign starts heating up after the first of the year, we expect more action. and the president'team and the president himself, rudy willani, have said they not cooperate and will not be interviewed by mr. mueller. there's a lot happening. that isof the things interesting about this is whether or not some of this is orchestrated the white house. the president has been good by distracting or changing the story, narrative, as necessary. and if there is something think what the robert mueller investigation heating up, this allows him to kind of changes the story and the narrative as he goes. it is heating up. there will be a break but after the first of year, if the
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government is not shut down, there will be a lot going on at the white house. never been thank you so much. jo -- nejra: thank you so much. schneider. what assets are more likely to move if president trump's legal woes worsen or improve? it out on your bloomberg. joining us for the hour is the chief economist at an investment company. good morning. let me put it this question to you. what assets are more likely to move on u.s. political turmoil? stocks. a lot for stock markets to think about. and i think the most important thing to remember qe,ecause of the lack of the stock markets are more vulnerable. suppressing.een
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manus: we will talk more about the fed and shamik dhar will stay with us. our attention to the other political risk which is theresa may has pushed back to the idea of holding a second brexit referendum. to make the divorce still more attractive. and what time yesterday, after the show, a ray of light, a vote would be in the cards. that has shifted gears. on sunday, decrying that. where are we? emma: the fact that may in her speech to parliament, what has been put out overnight, what she did in brussels last week, she has been pushing back.
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may, for a long time has stonewalled on referendum can't she has always said the same thing that we had the people's vote already. now, what we see is she is engaging with the idea and saying why and explaining why it is a bad idea. it would, she said delay, it would a delay brexit. today, she said it would be of the trail of democracy. a detailed is giving response a why she does know what the referendum. it is becoming more likely. secondthat is the referendum, emma. a number of outcomes we are talking about and not least the prospect of corbyn a calling a vote of no-confidence. where are we with that? : veryoss-thomas
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interesting, but hard to tell. there is pressure on him to do so. was are not, there are lots of reasons not to. we heard we will do it -- he will do it when he think he has a good chance of winning it. i am not sure i can speculate on it of corbyn calculating he can win it. , the holidays on thursday, it is going to be before then. manus: emma, thank you. emma ross-thomas with the legs -- with thet, latest on the brexit for quite surreal they could go on holiday. . couple of breaking lines worth keeping in mind, debate where we are. the eu to polish proposals to prepare for a no deal brexit, according to politico. they eu made it clear an extension of the current
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agreement. this is coming from politico. perhaps the worst-case scenario. shamik dhar is at the chief economist at bny mellon investment management. thanks for standing by and listening from our editor. scenario,ok at this many of my guests have said we are now down to know brexit or hard brexit. , where doard brexit you read the tea leaves this morning as we hear this over the weekend? shamik dhar: it is pretty clear, i think, that the deal on the table will be hard to get fat through parliament for the options you outlined is the one the market is trying to price in. you have a feel for the markets.
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the politics having an enormous impact on volatility. price ints trying to two very different outcomes. if we have no deal, very likely sterling will follow and sharply. noofter brexit or even brexit at all would probably cause sterling to rise. a probability of each of those things change from day to day, is around a you have political volatility leaning into the market and current super nejra: continuing given what you said, if you had it to position, would you say that strong is going to move higher or the downside? shamik dhar: i think the downside risk is greater. is aact that no deal legislative default makes another option, makes the other options not impossible but much more difficult to achieve and
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will require a departure from the current state. i think on balance, i would say no deal is more likely and seleka the short run. -- and selling in the short run. months might, 6, 9, 12 not the line, it could be as a joe maddon disaster as people think. a couple of months into no deal, you might have to reevaluate. manus: i wanted to pick up on it. you are the chief economist and i want to pick up on the prospect of no deal or a softer brexit, ok? isn't it fair to say, if the hard brexit, we vote to say or a softer brexit, very subliminal continuous brexit risk and the u.k. economy. away.not going to go
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you are a global investor with a global fdi to position. the u.k. is less likely to gain than other destination. is notexit the risk going to be impugned for a long, long time? : i am afraid i think that is right. it is understandable and investors are steering clear of the u.k. i suspect you are quite a right to say it is baked in for a while. the only point i was making earlier is while there will be no doubt in the case of no brexit, a large disruption in the short run. further out is much more difficult to call. we should be aware of that. chief shamik dhar economist of bny mellon stays with us. breaking news out of italy.
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reaching an on court on the adget, according to government official. there were discussions over the weekend and we saw yields drop on that prospect of a 2.04 deficit target. we are significant below a held and that is something to watch ,t the open of the bond market reaching an accord on the market. still ahead, a big week for the fed and how much could volatility play into the decision? manus: 40 years since china opened up and the slow down weighing on growth as policy makers are set to meet the next year's target for you if you are are on bloomberg radio. this is bloomberg. ♪
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manus: this is "bloomberg daybreak: europe." nejra: i am in the european headquarters. let us check on the market. the stock follow the last week seems to be easing. one -- yuanou strength. ,il holding on to the losses 2.7% drop last week. wti below $52 a barrel. manus: $46 billion ripped out of the u.s. stock market last week. bit higher.s a a confidence of understanding in italy. and di maio agree on the deficit the level. your business flash.
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avb is to sell it at percent of the power unit to two valuing thea deal entire deal at over $1 billion. back will be similar. they may power transformers, transmission systems and energy storage and would let abb focused on robotics. petroleum is buying the state in threeying a stake mexican options. global oil makers is attracted to the mexican side of the gulf as the government opens new blocks. that is your business flash. manus: thank you. china's top leadership is a meeting to set priorities for
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the country's economy. president xi jinping is expected to continuing a process as he faces criticism. his speech will cap a slow down. in the stockipeout market value. let us brendan i guess, shamik dhar, the chief economist at bny mellon an investment management. a lot of people will be pouring over the details of president xi's speech and what he promises from an economic point of view. more people hanging there had on the fiscal latitude. -- their hat on the fiscal latitude. there is quite a serious slowdown in a play in china. and slowdown is focused
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president xi is very aware of that. my guess is a combination of fiscal policy will get more , governmental work, if you like. and monetary policy will be loosened. in particular, credit will be focused, it will be, hopefully easier to lend to companies in china. neighbor bank will a slow down make it more likely the government will push on with the industrial policy? sayopposite of what people that china will back down in the trade war? shamik dhar: it is usually best to go to history. in the past, china proceeds stimulus as soon as the economy shows signs of slowing down more than it would like to see. my guess is it will be pretty bold this time. any focus will be on credit
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delivered to private companies. manus: the news that china may tariffs, thoseo tariffs of 25%. do you get the sense that the chinese are in more urgent mode? they arear: i think very aware of the dangers of the situation and, that, yes, this morning's moves is consistent with what their approach has been so far. approache a piecemeal to reducing the amount of trade attention. that said, the biggest issues revolve around ip and central property. there is not much sign of that changing yet especially where it conflicts with president xi's made in china policy. nejra: shamik dhar chief economist at bny mellon stays with us for investors are
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participating a rate hike from the fed. economists are down and back their expectations for the number of increases in 2019. if you are traveling to work, tune into bloomberg radio. this is bloomberg. ♪
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nejra: let's get a picture of the equity sucession in asia. but the index is inking out which-- eeking out again, the mouse doesn't show you -- the map doesn't show you. speaking of the u.s., it is the fed's big week. a rate hike is priced in by markets and anticipated by a car -- by economists. in an editorial for the wall
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billionaireal, a joins a course of high-profile investors urging caution for the fed. he says the u.s. and sustain strong performance next year, but can ill afford a major policy error. let's bring back shamik dhar. with the fed be making a policy error if it did not revise the dot plot for 2019? shamik: that's a difficult call. i think it will signal that it's about to go slowly, and that will be enough to calm the markets for now. my own feeling is that market is a bit overwrought in october. they were worried the fed was going to plow on. the fed was never in that situation. given the slow down, i think it was likely they would underperform what the dot plots were a couple months ago.
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i think they will signal they will be more cautious in the year ahead. manus: the caution could translate to two hikes next year. look at this chart. there's lots of pieces about recession risk and what the market is telling us. this particular chart has financials, transport and banks. transports are in a bear market, banks are heading that way. what are equity markets telling you about growth in earnings? goldman says it's pricing in zero, and that's just too pessimistic. are you taking anyone in signs from these crumbling markets? shamik: i think there's clearly a lot of nervousness around interest rates. i think that's why it's in the fed's gift to settle things down a bit. i wouldn't be surprised to see some improvement in those stock performance towards the end of the week once the fed signals it
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will get a bit slowly. next year, although there's a slowdown baked into the u.s. economy, it's not going to be a recession. you'd have to get another major shock to push it into recession territory. there's some scope if the fed goes slowly next year. in thehink the recovery middle of next year. nejra: i want to dig in more on the bank stocks. someone writing the banks are the coal mine in a bear market. but it's not only u.s. banks, its banks globally. i want to show you this chart which suggests basically that global bank stocks are lower than on the eve of the lehman bankruptcy. what that suggests is investors don't see banks in a better position than back to the beginning of this chart. when i talk to people about the risks in the system, they talk about corporate leverage, x financials.
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is this chart telling us we should be more concerned about banks and their potential implications for the economy? shamik: when it comes to banks, we have to discriminate between the u.s. banking sector and the rest of the world. the u.s. has moved a lot. it's a lot better capitalized than it was on the eve of the lehman crisis. that's also true in europe to some degree, but not as much. there are more banking sector vulnerabilities in europe, particularly related to italy. and potentially to investments in emerging markets. i think markets are nervous about it. i wouldn't say this is a global thumbs down for the banking sector, but there are issues in europe for investors to be worried about. manus: there are indeed. sounds as if nejra and i are digging around for the downside. but here's another one for you. what i'm going to try to do is
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assess where are the risks. that's what i'm trying to do. i bring up this next indicative movement in the market. this is from the leverage loan market. 2.3% was ripped out of the market last week. this could be something that's quite important. but 10-15%, iary, want to take you back to 2008 when everyone was trying to get out of the same gate. a leverage market, highly leveraged market. this was where the market missed the hallmark last time around. does that flow of money disconcert you in anyway? shamik: it does worry me and a think the leverage loan market has been relatively doubling for some time has had high yields generally. that said, i think while you could see quite a nasty shakeout and that market, i think it's unlikely to generate a huge systemic event of the magnitude
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of 2008. why do i say that? it's fundamentally because these loans aren't going through that. while we might get too, way -- are unlikely to get a subprime 2. nejra: just because you believe the picture will be benign, i want to test the hypothesis and talk about the downside. i have a quote from the vis over the weekend saying if inflation did not raise its ugly head, a downturn could take place. since the early 1980's, economic downturns have been triggered more by financial booms gone wrong than by monetary policy tightening to quell inflation flareups. do you see inflation as a bigger risk than what this quote is suggesting? shamik: so, i need to be careful how i answer that. if inflation were to pick up, that would be the way to generate a recession.
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that would lead to a situation which the fed was behind the curve, not ahead of it. any sudden rise in interest rates could hit both of the market and the economy. i don't see much of an inflation threat, so maybe that's why i'm coming off a nine. --y are right -- b nine. benign. they are right to point it out, and while i don't want to sound sanguine at all, it's possible language loans -- leverage loans could generate a downturn. because the interest rate background and of the monetary policy background is so supportive, it's quite hard to see that generating a big recession in and of itself just now. nejra: shanik dhar should -- stays with us. let's check in on the markets around the world. joining us in move mine -- mumbai is demeanor mckenna and annmarie hordern. what are you looking at in the
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indian markets today? >> well, today the indian markets have seen a strong move carrying forward from friday's session where it left off. is ultimately approaching 11,000. we've got gains of more than .5%. the contributors are present and some of the banks. you're seeing it defensively, as well. the 12,000 market is a good indicator to watch out for. aside from that, you're seeing volatility come off significantly. week,now stock 15 on which is interesting since a week ago, we had large levels of 20 plus. this was coming off volatility because of the state election has been encouraging.
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nothing much has happened on the rupee front, except for the fact we're still trading within 71.5-72. manus: thank you very much, devina with the latest from indian markets. annmarie hordern is our piece of gold on the markets. she's chasing yellow gold. good morning. annmarie: good morning. bullish trending once again. i'm looking at net positions. first time since july and five months, we have bearish wages outpacing bullish wages. this is speculation the fed will slow its pace of rate hikes. you are talking about druckenmiller over the weekend urging the fed to a slowdown and stop its fed hike. likely gold will be in focus. moving on, talk about black gold. i'm looking at wti's, holding $51 a barrel, even as we have
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working u.s. oil rigs falling to the lowest level in eight weeks. it's fallen for two consecutive weeks. usually this means it could prop up prices for wti. it's working against it. this market is starting to speculate whether the opec and from cuts were deep enough, and could combat shale. so much shale means it will squash any price rallies we could see. manus: thank you very much, and reordered with of the latest -- annmarie hordern with the latest on markets and charts. let's get the first word news with annabel. annabel: president trump's shakeup of white house staffing is continuing as the u.s. mexico border wall funding escalates. ryan zinke proceeds as interior secretary is set to set down. the president is considering a replacement for wilbur ross.
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ahead of a government shutdown later this week, leading politicians on both sides say it's up to trump to resolve the issue. mario has commented on the rise of populism, defending two decades of political and monetary integration. the ecb president lists what he sees as a success for the market and currency. he admitted not everyone benefited. he said lower prosperity and some countries was due to domestic policy choices. >> the challenges that have arisen have become ever more global in nature and need to be tackled together, not alone. this is more true for europeans. both at the levels of their individual nations, and for the continent as a whole. protests are being taking place in budapest against hungary and prime minister. converged,strators
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demanding a free press. police force protesters away from the building. officials refused a request by lawmakers to go on air with their demands. the global environmental movement is bracing for a fight with populous after international climate talks. the meeting wrapped in poland with an agreement of 200 countries among the pairs accord. the green groups, diplomats, and like-minded businesses, will need to deal with carbon emission cuts. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. nejra: dramatic week for u.s. politics. facing the process of a
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bloomberg shutdown. we are asking the question, what assets are most likely to move on u.s. political turmoil? you can join the debate, reach out to u on ivy plus tv on your bloomberg. manus: keep an eye on those treasuries slashing the short position. to the corporate side, the board meets today to discuss the future of carlos ghosn. abb agrees to sell a majority stake in its power grid unit, valuing at $11 billion. stay with us for stocks to watch. ♪
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manus: you're watching daybreak europe. i'm manus cranny.
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er, just a little bit of a sound problem. let's talk about japan. let's get to annabel drew those. she has the latest for us in your news this morning. annabel? annabel: japan's ties are nearing a deal to buy bristol-myers over-the-counter unit, as it seeks to boost its overseas presence. an agreement could be announced this week, with a deal worth $1.6 billion. petroleum is buying stakes in three oil blocks as it bolsters its global position after leaving opec. they will produce about 90,000 barrels of crude by the end of 2021, and hold reserves to 2 billion barrels.
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global oil majors are being attracted to the side of the gulf as it opens new blocks for development. jaguar land rover is planning to eliminate thousands of jobs, with an announcement expected in the new year. the u.k.-based luxury carmaker will impose the cuts as part of a three-year turnaround plan. two months ago, it announced plans to lower cost by 2.5 billion pounds within 18 months. that's your bloomberg business flash. nejra, manus? manus: thank you. we promised you stocks to watch, and this is what we've got for you. on the agenda, the stocks we're focused on as follows. renault, nissan to call urgent shareholder meeting to discuss governance and its indictment of carlos ghosn. then we've got the m&a story we're tracking, abb to hitachi
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for $11 billion. our reporters are standing by. tokyo in yokohama and covering the stories. let me bring it to you in terms of rental. this -- reynolds -- original -- renault. this is a huge investment. >> for renault, it's a big deal because it has a 43% stake in nissan, its biggest shareholder. for nissan to be indicted the same day as carlos ghosn, and looking like there may be trouble, nissan is looking to set up a government's committee -- governance committee. they are pushing for the shareholder meeting so they can talk about the indictment, the governance, and its appointees on the board. brett, let me turn to you
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then. this is the biggest acquisition for hitachi. take us through the thinking behind it. brett: hitachi wants to divest from its nuclear business. the nuclear business and japan, most of the nuclear power plants here have been modeled since the fukushima disaster seven years ago. no new plants have been built. in contrast, the business of making equipment for power grids is seeing by hitachi is having long-term earnings potential, very good cash flow. by the generation business, of course changing dramatically, going from fossil fuels and nuclear to renewables. and, about the power still needs to be distributed. hitachi will also be wanting to go into energy storage, as well, with this deal.
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it sees long-term potential. nejra: abb is to return money through share back and other methods. thank you for joining us. you can get the latest from our equities team by going to first go on your bloomberg and on the app. it's time to bring you three stories out of the u.s. over the weekend. president trump is pushing ahead with a shakeup of his administration after removing jeff sessions and his chief of staff john kelly. the announced secretary of interior ryan zinke would step down. manus: no shortage of political risk around the world. a government shutdown is looming after dispute of funding president trump's proposed u.s.-mexico wall. that continues with a compromise agreement with top democrats. it needs to be found before federal agencies run out after friday. nejra: finally, a string of legal setbacks related to trump's election campaign
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threatens to bring more turmoil to the white house. we're asking the question, what assets are most likely to move if president donald trump's legal woes worsen or improve? join the debate. ivy plus tv on your bloomberg. manus: let's get back to our guest, shamik dhar. shamik, we broke a newsline a little bit earlier. it's about this coalescing of mines in italy between content, between -- conte, the various parties. this is good news on the very top level line, that you've got conte and the politicians coming together. was a going to do to the market? is it going to stay the instability we seen in italic markets? it -- italian markets? shamik: it is good news and the markets will take it well. i'm still nervous about the
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status, the situation in italy. not so much about the size of the public debt, which we know is large, but it's a symbiotic's between the public sector -- symbiosis between the public sector and the level the italian banks hold. they have a lot of italian market government debt. i guess my fear is that some kind of shock may hit either the public sector side or the banking side in the next year or two. thet does, the fact that ecb is unwinding qe i'm not buying as much a telling debt as it has done in the past, and effect mario draghi is leaving this year, i think both of those things leave italy slightly vulnerable to the reemergence of what economists call the doom loop, this idea that as yields on government debt rise, bank debt rises, and you get a nasty
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cycle. i'm not saying that will happen, but if i have one fear of the european economy, is the doom loop. nejra: you have a fear of the doom loop reappearing. we're seeing a softening in upi's, germany, france, worries in the eurozone remain. is the ecb going to be able to raise rates before the end of 2019? shamik: i doubt it very much. ecb is going to announce an end to qe this month. that in itself is going to be quite difficult for some of the reasons i've outlined already. you're right to say the eurozone economy is slowing. core inflation is below target. the risks are they will have to relaunch qe at some point. i personally see very little chance of european rates going up next year. manus: if we take europe as the example, and the u.k. to a certain extent, the ambition to
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raise rates, get a brexit deal done, are you looking at the potential for the biggest market incident being the policy error from central banks hiking into perhaps the decentralized growth cycle? shamik: i'm hoping not. i still have some faith in central banks. i think markets are right to be concerned. there's conflicting information. at the end of the day, central banks are data-driven. u.s.,ngs slow down in the arguably more in the eurozone, my guess is the likelihood of the policy error goes down. these guys still respond to what's happening to growth and inflation, primarily. nejra: i love manus brought up syncronized growth. do we see synchronize growth in 2019, orders u.s. growth slow down to meet the rest of the world? shamik: we will see u.s. growth slow. the rest of the world will slow, as well.
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yes, the gap between the u.s. and the rest of the world will narrow, but u.s. will still be the best performing economy of the major g7. manus: can't let an economist out of the room without talking about the price of oil. they're doing everything to put a flaw in this oil price. how important is oil to you and the price of oil when you look at 2019? shamik: it's very important, particularly with respect to emerging markets. three things have weighed on emerging markets in the past year. one is the fear of fed hikes. two has been the fear of trade tensions. but the rise in the oil price earlier in 2018 has been pretty important. the fact that it's come down, together with the other two things, gives emerging markets, particularly asia emerging markets, summer spike. -- some rest fight. -- risk might. nejra: thank you for joining us,
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chief economist. shamik will be considering the conversation on bloomberg radio at 7:30 a.m. u.k. time. up next, we talk brexit and the prospect for a second referendum. this is bloomberg. ♪
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mom. ♪ manus: good morning from dubai. i manus cranny and this is bloomberg daybreak: europe. nejra: i'm derek k hedge life from the city of london -- i'm nejra cehic live from the city of london. manus: stocks start higher following two weeks of lunch dust losses. sid -- losses. earnings worries are overdone. all eyes on the fed, chairman jay powell expected to raise rates by a quarter of a point this week in the central bank's final meeting of the year. but will he dial back expectations for 2019? european political risk watch
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theresa may face parliament today. bills let and these vote on options on brexit. italy set to offered new targets to the eu. ♪ nejra: just under an hour away from the start of cash equity trading in europe. we could see a positive session. we saw weakness on friday, beside a in global stocks around concerns about global growth, with data out of china and the eurozone feeding into that. ftse futures up a quarter of a percentage point. cac 40 futures tracking higher. u.s. futures edge higher when the s&p 500 hit the lowest since april on friday. we saw health care and tech stocks underperform, the dow taking a hit lower of 500
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points. u.s. stocks even at one point, touching february lows. we did see a touch of a bounceback. how long will it last? particularly with the federal reserve in focus this week. manus: that could be the dovish hike to end all dovish hikes. i'm excited about bcp's. i can't wait for the fast market to start. they've come to an agreement on the budget deficit, 2.4% seems to be the coalescing of the number. we've reached an agreement on everything salvini's words. nip down byn -- two. the spread is the most important thing to keep an eye on. one thing that caught my eye on treasuries. if we get a dovish hike from the federal reserve, but if you look at the market, we dropped by 50% from the net shortage in september. last week, they added 100,000 in
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the next short positions. we're seeing the bcp's tick higher. this will potentially be like a bat out of hell if it gets going and the market believes that this is a line in the sand on the italian fiscal situation. in the meantime, what else have we got? more markets with juliette saly. juliette: thank you. pretty positive start to the trading week. 1.4% drop on the asia-pacific index on friday, weakness from wall street. the fact futures have been ticking higher supports asian equities. a good showing from indian markets from japan, which closed higher .6%. a special dividend by bhp, listing the asx 200. you can see weakness in e.m.'s and the china market down. but the lows of the day, down around .02%. we have a policy meeting and china, and a number of central
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banks in the region. the bank of japan, thailand, and indonesia meeting. let's look at some of the fx moves in asia. you've seen upside coming through in the on sure you on, a pboc official saying seven to the dollar, the line in the sand we should be ignoring, they say it's actually important. gained .01%. in the indian rupee, we've heard he reckons he should go short the rupee and long the indonesian rupee are. it's different because it's falling against the dollar, the worst performing currency. that weighed on the overall jakarta index, as well. nejra: juliette saly in singapore, thank you. breaking headlines from as as a, saying -- sse, saying the deal with energy is not proceeding. they option includes a standalone demerger and listing.
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it says other options for energy services should be considered. and it's work two separate the services is to continue. thatally, sse determined it isn't in the best interest of the stakeholders. and they are unable to reach a packed on revised commercial terms. that is the latest year. sseenergy meanwhile saying services is to be profitable with cash flow profit is -- positive. it's not in the best interest of stakeholders to proceed with the proposed sse energy services. manus: it's amazing, abb doing the deal with hitachi. other breaking news on the retail side, readjusting their view of growth. growth in sales 15% originally. they told markets it would be
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20-25%. the sales for next year, growth outlook has been slashed. it's red headline. the final your sales growth will be 15% from 20-25%. the retail margin, the margin will drop by 150 basis points. the margin under pressure, growth outlook under pressure. the word they are using is recalibrate the expectations for the full year of 2019. there's been a significant deterioration in trading in the month of november. nejra, you're not doing enough shopping, that's for sure. is it the amazon effect? the retail affect? are we under pressure in terms of cash in our pocket? cash margin significantly behind expectations. nejra? let's get the first word news with -- yep, no, no, go ahead. nejra: h&m sales for the fourth
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quarter actually meeting estimates. it's some news on the retail space. go get my christmas presents, manus. manus: you know what? i'll see you tomorrow morning so i'll have it with me. nejra: let's get the first word news. >> president trump's shakeup of white house staffing is continuing after a run of funding escalates. ryan zinke proceeds as interior secretary is set to set down. the u.s. president is considering a replacement for wilbur ross. ahead of a possible government shutdown later this week, leading politicians on both sides say it's up to trump to solve the issue. >> president trump should understand, there are not the votes for the wall in the house or the senate. he is not going to get the wall
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in any form. u.k. prime minister theresa may will attack supporters of a second brexit referendum today as she expects to parliament white eu leaders rebuffed her summit last week. she accused tony blair of undermining her negotiations by pushing for a second vote and says it will be a catastrophic breach of trust. >> suppose we had another referendum. 152-48, but it was on the lower turnout. if there is another referendum, which i do think there will be, people like me will be demanding -- what does that end up? >> protested take place in budapest against the prime minister. thousands of demonstrators converged, demanding a free press. police used tear gas to keep
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protesters away from the building after officials refused a request by lawmakers to go on air with their demands. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. ?ejra nejra: thank you. theresa may pushed back on the idea of holding a second brexit referendum after eu leaders failed to provide any leeway to make the divorce deal more attractive to lawmakers in the u.k. joining us now is devon merit. good to have you with us -- david merritt. give us your thoughts. david: this speculation really heating up. they headlines on this and the momentum seems to be growing behind this idea. why? it is because parliament is deadlocked over this issue. we know her vote, because it knew she couldn't win at the
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moment. she's gone back to brussels. concessions have been rebuffed, but she's not come back with anything. today she will speak to parliament again and she's given advance notice of the comments. she's going to say it's a betrayal of the public's trust in us, politicians, that we made a decision and their job is to execute on that. the problem is, parliament can't decide a way forward. this idea of a second referendum is one of the things she could do. the other thing is to change parliament if she can't get the answer she wants, which is another election. over the week, she will have to make a decision one way or the other. manus: good to see you this morning. in terms of trying to find what the market risk is here, it would seem to be that the second referendum potentially off the table. do we move closer to a no-confidence vote from the other side of the house, and
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potentially game theory in terms of no brexit or hard brexit? are those the three answers that come out of this issue if she moves away from a second referendum? david: that's right. it's still an option even if mrs. may says it's not an option. of course parliament may try to exert its weight to get that through. all the options are on the table. the only thing off the table is the leadership challenge from her own party. that's already happened. all the other things, labor is awaiting to time that to a moment what they think they can win, and then provoke a general election. that's certainly one. or carrying on towards the end of march with a no deal brexit, stepping up the preparations. is she willing to drive britain over that cliff edge after all the warnings we've had, the extreme scenarios? that seems unlikely, but still an option.
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or perhaps as we get closer, do the people on both sides of her party rally behind her a little bit more and get this vote over the line? she needs all of them to vote with her to do that. that also seems unlikely. many of the options are still out there. no one is the wiser which way it's going to go. manus: many options on the table. i'm sure we'll get through a few of them before parliament recesses for christmas. our partner david merit at bloomberg news. joining us is the chief currency strategist at dws. good to see you this morning. you're included in our list of market contrarians who proved right with the euro-dollar called. how contrarian are you with sterling? the pound has negative political risk. eurosterling, is it politically priced for hard brexit? good morning. guest: good morning.
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we are not that contrary and on the eurosterling, as we are on the euro-dollar, most of the bad news is priced in right now. you are already able to see before theresa may went to talk to you leaders before the end of the week last week, that the market didn't have much help there anymore. but we don't think the market is priced for a hard brexit. and as such, is not our base case scenario. there's little interest, as your cali just explained, from both sides, the eu as well as the u.k., to head for that solution. nejra yes, good morning, from london. manus is referring to the piece from bloomberg, with the pound is judged less ugly by the euro by analysts. banks saying sterling could rise by the end of march.
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you got up and miner funds saying the pound priced in more bad news. what are you targeting on eurosterling? could we go to 87? saying it me start by think there's an agreement that there may be more exit risk for the sterling because of the bad news eating priced in. however -- being priced in. however, it doesn't look less ugly than euro and if we are heading towards 87, i wouldn't be headed in that camp. we see euro in the short-term still being under pressure. in that equation, eurosterling should actually stay where it is. manus: we've just had the news that there's a meeting of minds between conte and his cohorts in and a newaio etc. proposal for the eu. does that help the ecb?
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is that a small taste that helps the ecb towards normalization next year? say, it's a small piece. it's one piece, of course. it's not small. it's an important piece, but looking to next year, we have lots on the agenda. can i give a few statistics that are also outside italy? we have 28 member states, eight of these governed with a populist party and the government. we have three potential elections next year, italy amongst them. we have one country leaving the eu and next year, eight more member countries going to parliament to elections. on top of that, we have three major institutions in the european union undergoing personal change, being the european parliament, the european commission, and also the ecb.
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we have lots of news to digest, lots of uncertainty to deal with. italy makes the equation, weighing it down. less a short-term relief, when there's debate on measures that would help. would it change the overall outlook for the ecb to completely amend their wording that we saw last week? not so sure. nejra: yes, and you are targeting 115 on euro-dollar by the end of next year. stefanie will stay with us. some breaking news, malaysia filing criminal charges against units of goldman sachs. just going through the headlines, malaysia charging goldman over for us statements -- false statements. just crossing the bloomberg, malaysia filing these criminal charges on goldman sachs. manus: that story has really taken a mind of its own. it's been reopened, and there's
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the story here in regards to lloyd blankfein's final days being clouded by this scandal. that's the title of one of the latest stories we've written there. terrifying thing. he said these are the x partners we met. this is one of the clouds hanging over goldman sachs about these false statements linked. it doesn't name names. if files charges. malaysia files charges against goldman leistner and roger energy. those are two names in this particular statement. nejra? nejra: we'll keep an i on that. when you're traveling to work, to into bloomberg radio on your mobile device or dab digital radio in the london area. this is bloomberg. ♪
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manus: this is bloomberg
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daybreak: europe. i'm manus cranny in dubai. nejra: i'm nejra cehic in london. malaysia is filing criminal charges against units of goldman sachs. malaysia is seeking fines in excess of $2.7 billion against goldman and others. malaysia charging goldman over false statements linked to 1mdb. we'll keep an eye on that story and bring you more as we get them. manus: let's quickly check in on the markets now. we've got the small bounce in asia. some rhetoric moving from the chinese side in terms of auto tariffs. citigroup had a note to buy the drop in the global markets. mixed crude geeking out the smallest of gains. looking at riggs in the u.s., perhaps the least number in eight weeks there. nejra: taking a look at u.s. futures, pointing higher after
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the s&p 500 hit an april low on friday. they did get pummeled along with the dow, health care and tech stocks underperforming. the 10 year yield on a 2.89 handle. we been watching the curve to see if the fed makes any changes, the mo saying if we don't get changes, we could see further curve flattening. .1%, socks features up we could see again after weakness on friday. back to the fed. it's a big week. rate hike priced in by markets, anticipated by economists in a bloomberg survey, who see the fed slowing its pace in 2019 amid rising risk. let's bring back in stefanie, chief currency strategist. are you expecting a dovish hike from the fed this week? stefanie: we are amongst the participants that are investigation of a dovish hike so i would say we look at the
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language, they are two different outcomes. the dot plot be changed from three to two hikes and the like which can between. we have to be mindful that we are off autopilot and we will be more data dependent. i just want to caution because the market has obviously already priced out a lot of rate hikes for next year. it's pricing in for another 25 additional rate hikes for next year. we think that's too much. the data, as we get it right now, we look at those, are not giving away that gloomy picture that the market is pricing right now. dovish hike yes, but going into 2019, we'll get more clarity whether that's something that can be adjusted according to data coming in. manus: and of course if you look at the housing data, you could say they would cause. if you look at wages data, you'd say they've got every right to crack on hikes. look at this.
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these are the median estimates for the dollar. yousef it could be rhetoric in the dollar. does it take both to be dovish to not the dollar lower? morgan stanley says the dollar is overvalued by 10-15%. do need both elements to talk about the dollar? -- top out the dollar? stefanie: we have already priced the scenario. i wouldn't argue for a big move in the dollar on the back of something that's expected this week, to be quite frank with you. but of course, although we only get second-tier data this week, something like the housing starts will get much more attention. also the union michigan, and other data that we get, will get much more attention because everything is data dependent and everything will be looked at in scrutiny. apart from the fed and the rhetoric, we will look at the oil data coming in. empire manufacturing, etc. nejra: the dollar gains over the
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past three months have pushed hedge funds to cut their bullish bets to the lowest since june. how bullish or bearish are you on the dollar in 2019? 2019, by the end of the year we will see euro-dollar forecasting at 1.15. in the interim, we see euro-dollar moving much lower, targeting 1.08 21.10. which as i explained -- manus: sorry, go-ahead finishes the. -- go ahead. finish your thought. stefanie: i want to mention that there is not just a dollar component, u.s. fed price component. as i mentioned earlier, there's a big euro situation to price in, which moves euro-dollar and brings uncertainty.
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therefore, euro-dollar is justified to move much lower going forward. manus: ok, thank you so much. stefanie, the chief currency strategist at the ws -- at dws. the breaking news is this. goldman sachs, malaysia seeks finds in the excess of $2 billion. they are filing charges against individuals mr. leistner and ng, charsgy -- roger over false statements linked to 1mdb. that is the story that's going to carry threat the day. we bring you all the breaking news on that. i'm off to the airport. i'm going to bring you your christmas present. i'll see you live at 6:00 a.m. but i will have done a days work. nejra: can't wait to have you on set. if you see manus on your flight, say high to him. -- s8 hi to him.
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bloomberg markets is up next. tune into bloomberg radio live on your mobile device and dab digital in the london area. this is bloomberg. ♪ ♪
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togood morning, welcome "bloomberg markets: the european open." i am anna edwards alongside matt miller in berlin. are highers following two weeks of losses. u.s. features point of a rebound. they say by the global stock did. the cash trade it left is 30 minutes away. anna:


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